Investment Strategy

in Investment

The most common paradox we come across is 'money does not bring happiness.' Then why since time immemorial, people from different civilizations, continents, customs and religions desire to be affluent, prosperous and wealthy. Money is not everything in the world, definitely there are few things, much more important than prosperity, like our health, family and people we love and respect. Nevertheless, money is the binding factor of present age that manages all our needs.

People who say money could never buy happiness are those who either don't have money or those who have it but do not know how to properly utilize it. The best utilization of money is to invest it, to get an opulent present and future life, without economic worries.

For the success of every mission a strategy is needed. To get the economical freedom and be self sufficient one has to adopt investment strategy. The strategy mirrors various internal and external factors such as present income, the type of work and industry, age, education, mindset, risk tolerance and so on. There are various avenues of investments: art, antiques, business, property, equity and so on.

However, historically proven, investment in equity yields higher returns provided we have prudently planned our portfolio. Equity investment means buying shares of a specific company with the expectation of generating wealth through dividends, capital gains and appreciation in the price of shares. The role of the investor is to provide the requisite funds to the company, with the assurance of receiving a proportionate percentage of profit.

Investment strategy is associated with various risks. We should properly understand several kinds and forms of risks before taking investment decisions. The most widespread risk is emotions and speculation, Speculation is not investments; investing in equities and/or derivatives on the tips from friends, relatives, guests on CNBC TV, etc. expecting a quick windfall profits. Understand, that even the most visionary and experienced investment guru like Marc Faber acknowledges timing the market is the most difficult task and requires lots of experience, expertise and data. Every investment decisions should be based on proper research conducted by competent analysts. Once should take their advice and ask as many questions in order to clear the air

The most successful investment strategy, adopted by Berkshire Hathaway chairman Mr. Warren Buffett is value investing. Accumulate shares of companies that are available at tangible book value, are traded at lower than their book value, have low PE (price to earning) ratios with high dividend yields. Value stocks outperform market in longer run, provided we do not let our emotions play any role in our investments decisions. No greedy buying, no panic selling, no speculations, not following herd mentality i.e. buying or selling because one of our acquaintances is doing so. We should always diversify our portfolio baked by solid research conducted by proficient professionals of a qualified fund house offering PMS services with good track record. Never forget to periodically monitor and evaluate the returns of the portfolio, checking if they are going steady with the market or the benchmark index and the investment goals.

Always keep in mind that our money should work as hard as we do and if the portfolio is not keeping pace with the expectation, do not shy to reshuffle the investments. In the end of the day, we would be responsible for the profit or loss, so be shrewd and prudent and get rich soon.

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Vijay Kumar Sharma has 1 articles online

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Investment Strategy

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This article was published on 2010/03/29